Banks, petrochemicals lift Saudi benchmark index

Al Rajhi Bank helped Saudi Arabia's index end higher for a
third session in four as investors bought in ahead of fourth-quarter earnings.

Al Rajhi climbed 2.4 percent. The largest listed Saudi
lender is forecast to report a 15 percent increase in quarterly profit,
according to a Reuters poll.

The banking sector index climbed 0.8 percent to its highest
close since Aug 3.

"Saudi banks' credit growth has been very weak over the
last 18 months, but has picked up in the past two quarters," said Shahid
Hameed, Global Investment House head of asset management for the Gulf region.

"Bank stocks have underperformed the rest of the
market, but valuations are good and they are well run with a conservative
outlook and strong balance sheets."

Emaar Properties and builder Arabtec led gainers as Dubai's
index ended higher for a third session in four, but low liquidity meant traders
offered little hope of a sustained rebound.

Emaar and Arabtec each climbed 1.2 percent and between them
accounted for more than half the 45.5 million shares traded on the index, which
rose 0.4 percent to 1,340 points.

The benchmark is within 25 points of December's seven-year
low, while Dubai bourse turnover last year was the lowest since at least 2004
and barely a tenth of the 2008 total.

"The UAE markets are range bound - we need to see more
liquidity," said Musa Haddad, head of MENA equity desk at National Bank of
Abu Dhabi. "Institutions are not yet in the market and it's struggling
within the long-term range."

Telecom operator Etisalat, the UAE's largest listed stock, was
the main support, rising 0.6 percent, while First Gulf Bank added 1 percent.

Abu Dhabi's next support is at 2,320 points, Haddad said,
warning a break below would signal further declines, while resistance comes at
2,420. A break above 2,470 is needed to show the index has reversed its
downtrend, he said.

Qatar National Bank (QNB) made its largest decline in more
than two years after the lender's proposed dividend disappointed investors.

QNB ended 5.2 percent lower, its biggest drop since December
2009, after saying it wanted to pay a 40 percent cash dividend and issue bonus
shares amounting to 10 percent of share capital.

"The market will be disappointed by QNB's dividend and
bonus share issue," said Shahid Hameed, Global Investment House head of
asset management for the Gulf region.

"QNB's results tend to read across the market and so
are dragging other bank stocks down today. Daily trading tends to be retail
driven and these investors have seen the proposed dividend and decided to
sell."

"Kuwait's market is underperforming," said Shahid
Hameed, Global Investment House head of asset management for the Gulf region.
"The market still has structural issues - banks dominate, plus a couple of
telecoms companies and then some others such as Agility and KIPCO.

"The rest are largely real estate and investment
companies, which are facing major challenges in terms of profitability and
liquidity and many are heavily invested in Dubai real estate, which remains in
trouble."

Kuwait banks are exposed to these troubled companies, which
limits potential gains in banks' share prices, said Hameed.

"Kuwait banks are also trading at higher multiples than
many in Qatar and Saudi Arabia, so why would you buy them?" he said.

"I don't see the Kuwait market dropping sharply from
these levels, but it will remain sideways," said Hameed.

The main index climbed 0.5 percent to 5,720 points.

In Oman, Muscat's benchmark fell for a second day since
Sunday's four-month high, slipping 0.3 percent to 5,714 points.

"Infrastructure spending by the government should prop
up the market as the market follows general economic sentiment," said
Joice Mathew, United Securities head of research.

"Index heavyweights are seeing some profit taking
because they had a good run up. Investors are waiting for earnings to come
out."